EPFO tightens premature final settlement rules amid rising layoffs; full PF payout only after 12 months of job loss

EPF corpus has grown nearly five fold in a decade

The Employees’ Provident Fund Organisation (EPFO) has revised the timelines for premature final settlements from the provident fund and pension accounts, a move that makes the rules more stringent than before.

Members can now apply for final PF settlement only after 12 months of leaving employment, compared to the earlier two-month window. Similarly, pension withdrawal will now be allowed after 36 months of unemployment.

Currently, a member who has been unemployed for at least one month can withdraw up to 75 percent of the EPF balance in their account. Under Paragraph 69(2) of the EPF Scheme, a member who remains unemployed for two consecutive months is allowed to withdraw the entire EPF balance.

Under the new rules the timeline for premature final settlement and pension withdrawal has been revised. Members can now apply for final PF settlement only after 12 months of leaving employment, and pension withdrawal after 36 months, compared to the earlier two-month window.

"The unemployed subscribers will now need to maintain a minimum of 25 percent of their accumulated for a period of at least 12 months as compared to 2 months earlier. Full corpus can be withdrawn after 12 months only," said EPFO Commissioner Ramesh Krishnamuthy at a press briefing on Tuesday.

The reason for the increase in timeline is to allow the subscribers avail the benefit of EPFO interest for a period of at least 12 months and avail pension benefits," added Krishnamuthy.

The change, part of the broader EPFO 3.0 overhaul, could pose challenges for workers who lose their jobs and depend on their provident fund corpus to meet financial needs during periods of unemployment.

Also Read: EPFO 3.0 Explained: What the new PF withdrawal rules mean for 30 crore members

While the change may align with the long-term vision of promoting financial security, it comes at a time when layoffs have become more frequent across sectors. Many employees facing prolonged unemployment may now find it harder to access their PF savings quickly.

Recent months have seen a spike in layoffs across India’s IT and fintech sectors, highlighting the growing vulnerability of salaried workers who may depend on PF access during job loss. For instance, Tata Consultancy Services (TCS), one of the country’s largest employers, has confirmed cuts of nearly 20,000 jobs in a single quarter.

Meanwhile, Paytm reduced its workforce by approximately 4,600 employees in FY 2025 as part of internal restructuring efforts. These developments underscore the urgency and potential hardship for many who, under the new stricter settlement timeline, may find themselves unable to access their PF savings in the short term following unemployment.

While the simplification of rules and digital access are welcome reforms, the extended waiting period for full settlement in case of an unemployment marks a significant shift, one that balances retirement protection with immediate financial needs.

(With inputs from  Priyansh Verma)